I have read many articles in your forum regarding term insurance. You have asked people to buy two or more term insurance covers if the sum assured is over ₹1 crore. I am unable to understand this logic since if I take term insurance from two insurers, then the premium will cost 1.5 to 2 times more than the single insurer. Example: ₹50 lakh term cover from LIC and ₹50 lakh cover from ICICI Pru. I can undestand diversifying in equity mutual funds, but I don't understand diversifying while buying term insurance and paying more premium.
- S Sahu
It is not absolutely necessary to split a large term cover between companies. We generally ask individuals to split a large term insurance cover between two insurers is to spread the risk of a big cover. Different companies follow different methods of settling the claim. For example, one might take longer than the other to process the claim, one might need more paperwork. You can overcome these issues by splitting your cover.
It is true that splitting the cover between two companies would push up the premium by 10-12%. However, if the premium is much higher as you stated, you should check the premium with other insurance companies. If you can't get the covers at a marginally higher premium, you may settle for a single insurer. While buying a term cover, you should also place equal importance to the cliam settlement ratio of the firm.
LIC term plans are a bit expensive than the plans from private insurers. You may opt for term plans from Aviva, HDFC Life or Max Life insurance. If you are young and eligible to buy an online policy, go for online term plans. They are cheaper than offline plans.